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Unfair method of competition

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Overview Edit

The U.S. Supreme Court in Federal Trade Comm'n v. Sperry & Hutchinson Co.[1] endorsed an expansive reading of the "unfair method of competition" prong of Section 5 of the FTC Act, stating that the Commission is empowered to “define and proscribe an unfair competitive practice, even though the practice does not infringe either the letter or spirit of the antitrust laws” and to “proscribe practices as unfair . . . in their effect on competition."[2] That description of the scope of Section 5 accords with the legislative history of Section 5.[3]

Notwithstanding that broad description, the unfair method of competition prong of Section 5 is subject to limiting principles. The first relates to the nature of the conduct. In Official Airline Guides v. Federal Trade Comm'n,[4] the Second Circuit held that such a violation could not be found where the respondent "does not act coercively."[5] Similarly, in E.I. DuPont deNemours & Co. v. Federal Trade Comm'n,[6] the Second Circuit held that “at least some indicia of oppressiveness must exist. . . .”[7]

The second limiting principle relates to the effects of the conduct. Although the Supreme Court has made it clear that the respondent’s conduct need not violate the letter (or even the spirit) of the antitrust laws to fall under Section 5, that does not mean that conduct can be considered an unfair method of competition if it has no adverse effect at all on competition.

References Edit

  1. 405 U.S. 233 (1972) (full-text).
  2. Federal Trade Com'n v. Sperry & Hutchinson Co., 405 U.S. 233, 239 (1972); see also Federal Trade Comm'n v. Independent Fed’n of Dentists, 476 U.S. 447, 454 (1986) (full-text). See generally Concurring Opinion of Commissioner Jon Leibowitz, In re Rambus, Inc., Docket No. 9302 (full-text); Statement of Commissioner J. Thomas Rosch, “Perspectives on Three Recent Votes: the Closing of the Adelphia Communications Investigation, the Issuance of the Valassis Complaint & the Weyerhaeuser Amicus Brief,” before the National Economic Research Associates 2006 Antitrust & Trade Regulation Seminar, Santa Fe, New Mexico (July 6, 2006) at 5-12 (full-text).
  3. See, e.g., Cong. Rec. 12,153 (1914) (statement of Sen. Robinson) ("unjust, inequitable or dishonest competition" proscribed), 51 Cong. Rec. 12,154 (1914) (statement of Sen. Newlands) (conduct that is “contrary to good morals” proscribed).
  4. 630 F.2d 920 (2d Cir. 1980) (full-text).
  5. Id. at 927.
  6. 729 F.2d 128 (2d Cir. 1984) (full-text).
  7. Id. at 139-40.

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